Same thing would happen to the businesses that held their deposits at SVB that happened to all the communities, businesses, families that worked and depended on a mill when they shut down logging or the same thing that happens when companies outsource production overseas and close whatever production factory. You go bust and your community becomes depressed. But hey at least they couldn't tell the folks in Silicon Valley they need to learn to code. LOL
It’s about the question of scale and systemic impact. Might not be fair but life rarely is and it is logical.
So in other words your saying it doesn’t make sense to give up on services in our “services” economy?
No argument. It was tongue in cheek. Folks rarely look past the now. Tech is a major stranglehold we have overall. And since business strategy is now tech strategy… No argument with me on the value. Or the value of the start-ups - which will continue to do very well which is why SVB will be bought.
What happens to the literally tens of thousands of employees if those companies go broke?
And while you may hate VCs, what happens to tech industry -- including millions of jobs, comprising over $2T in GDP, and securing the our position as a world superpower -- should they just go away?
In my opinion, you don't have to like VCs or tech entrepreneurs to want to protect the tech industry.
Just my $.02...
So in other words your saying it doesn’t make sense to give up on services in our “services” economy?
.... where I predict my home would be sold between 935K to 970K based on variability of comps and following M2 growth LOL . It's sold for 980K as accurately predicted.
hahahahaha I am able to solidly sell it 2 standard deviations above Zillow estimate.
Dude, there's no rocket science in real estate. Since you are the flip king in BP you know how to play it too.
Completely off topic but it’s a funny point around real estate. That argument many of us were involved in last year has pretty much come true of flat prices in real estate due to low inventory. It was predictiable but people were convinced the rates…..
People get way to emotional with real estate. Meanwhile out of all the investment vehicles it’s incredibly predictable and easy to monitor. Hell it’s why I forced a primary home new construction settlemtn in the same week we paid for our rather expensive wedding. We had 7 months of incredibly stress but because were one of the first in on the development from signed contact to closing we had a 10% appreciation gain on the property we bought. Sucky week but fun return in the long run.
I do think stocks are pretty predictable (index wise) over the long run 10-15 years. But I do wonder why so many ignore the values f real estate and get so emotional when stocks can crush you in a day.
1. People emotion is not good for decision-making, better use a chart. See this is Price per square foot in USA:
https://fred.stlouisfed.org/se... ; what I know from this chart, during covid, we have had three uptrends since covid, it's always from Jan to May (2020/2021/2022 and now 2023) , while it only has one downtrend (July 2022-Dec 2022).
Based on this chart we know by summer 2024, the price psf in US would be higher than in summer 2022.
2. You are right, stock index is also predictable, because stock index accumulation is following how much money is printed by the government, that's why if you map out M2 chart with the stock index and real estate, they're almost in a parallel line.
to point 2, thats why at a certain point my real estate funds just a few more years not only go towards more purchases but an index fund build. When I retire early, The fund gets merged with most of the general reseve but left in a slightly less risky index fund - 5.5% average target. I stop buying real estate then but let the fund build to create equally large interest returns.
I’ll take both paths thanks. Because even though I like real estate no need to force the kiddos to hold on to it. Simple fund with conservative returns is fine.
yeah, when interest rate goes down, invest in index that's tech heavy like S&P or nasdaq (as their DCF increases *DCF is actually a derivative of interest rate as well).
if interest rate goes up, invest in commodity ETF or in TBT
and if interest rate is extremely low, buy as many rental as possible lol
It's that simple lol
I'd only add one variation. buy as many rentals as possible when deals are to be had. I bought one q4 last year when everybody was panicking. COmmented how i used high interest to push down asking price initially then when roof was uninsurable to push it down further. It's still early but even getting it on the market just before new year - well we are on track for 27% CoC but I'm forecasting 21% conservatively. Deals are always there and should be snapped at any moment - despite high interest.
James would love that if the thread was still circulating.
.... where I predict my home would be sold between 935K to 970K based on variability of comps and following M2 growth LOL . It's sold for 980K as accurately predicted.
hahahahaha I am able to solidly sell it 2 standard deviations above Zillow estimate.
Dude, there's no rocket science in real estate. Since you are the flip king in BP you know how to play it too.
Completely off topic but it’s a funny point around real estate. That argument many of us were involved in last year has pretty much come true of flat prices in real estate due to low inventory. It was predictiable but people were convinced the rates…..
People get way to emotional with real estate. Meanwhile out of all the investment vehicles it’s incredibly predictable and easy to monitor. Hell it’s why I forced a primary home new construction settlemtn in the same week we paid for our rather expensive wedding. We had 7 months of incredibly stress but because were one of the first in on the development from signed contact to closing we had a 10% appreciation gain on the property we bought. Sucky week but fun return in the long run.
I do think stocks are pretty predictable (index wise) over the long run 10-15 years. But I do wonder why so many ignore the values f real estate and get so emotional when stocks can crush you in a day.
1. People emotion is not good for decision-making, better use a chart. See this is Price per square foot in USA:
https://fred.stlouisfed.org/se... ; what I know from this chart, during covid, we have had three uptrends since covid, it's always from Jan to May (2020/2021/2022 and now 2023) , while it only has one downtrend (July 2022-Dec 2022).
Based on this chart we know by summer 2024, the price psf in US would be higher than in summer 2022.
2. You are right, stock index is also predictable, because stock index accumulation is following how much money is printed by the government, that's why if you map out M2 chart with the stock index and real estate, they're almost in a parallel line.
to point 2, thats why at a certain point my real estate cash flow - in j just a few more years actually - not only go towards more purchases but an index fund build. When I retire early, The fund gets merged with most of the general reseve but left in a slightly less risky index fund - 5.5% average target. I stop buying real estate then but let the fund build to create equally large interest returns.
I’ll take both paths thanks. Because even though I like real estate no need to force the kiddos to hold on to it. Simple fund with conservative returns is fine.
.... where I predict my home would be sold between 935K to 970K based on variability of comps and following M2 growth LOL . It's sold for 980K as accurately predicted.
hahahahaha I am able to solidly sell it 2 standard deviations above Zillow estimate.
Dude, there's no rocket science in real estate. Since you are the flip king in BP you know how to play it too.
Completely off topic but it’s a funny point around real estate. That argument many of us were involved in last year has pretty much come true of flat prices in real estate due to low inventory. It was predictiable but people were convinced the rates…..
People get way to emotional with real estate. Meanwhile out of all the investment vehicles it’s incredibly predictable and easy to monitor. Hell it’s why I forced a primary home new construction settlemtn in the same week we paid for our rather expensive wedding. We had 7 months of incredibly stress but because were one of the first in on the development from signed contact to closing we had a 10% appreciation gain on the property we bought. Sucky week but fun return in the long run.
I do think stocks are pretty predictable (index wise) over the long run 10-15 years. But I do wonder why so many ignore the values f real estate and get so emotional when stocks can crush you in a day.
Maybe to an extent i.e. the Tesla/Snowflake 25 to 100x earnings junk that was going on. But I know you are in tech and know how hard all companies including them got snacked down. All of a sudden every single company in tech is focused on EBITDA. And start-up valuations/investments are even changing a bit there also. It’s no longer wholly about get the market share then figure out revenue.
So there is a pivot going on in tech that is backing away from some of the stuff you ae commenting on
This is where I understand what James is trying to stay.
The equivalent in real estate is the high.comp and low.comp ; but that number is pretty much stable and predictable over the years, unlike stock because DCF value is inherently correlated to interest rate.
So Tesla is pricing $1000 while their capex/opex is the same with rate is 2% ; but when rate is 7%, their theoritical price using DCF is $80 dollar although their capex/opex is stable.
Real estate in reality is behaving like different animal, recent indication shows it's more affected by liquidity rather than interest-rate per-se.
This is very interesting topic really, this is why I also I dont mind taking out of 401k and re-investing in Real Estate.
Well last 5-7 years has had very odd ratios on the the big tech stocks but if you go towards the other industries it’s a LOT more stable but I still agree there is some perceptual value. It’s just in tech it got widely out of control.
For example even in the AT&T example James made (BTW verizon took similar hit)
the company might not have changed but the way TMObile was hitting both companies + plus the perceptions in value did change over that same period. So I don’t know if I’d say AT&T was in a vacuum. At the same time AT&T and VZ was taking a hit T-Mobile was growing market share and hitting them hard.
Also some of the things that AT&T and VZ got into (digital media) hurt both of them. T-Mobile stayed hyper focus.
I’m not saying I disagree with James or you - especially tech stocks. but I’m also saying I agree with Scott it’s a bit of both to me. 70% around health of company, market share, and growth options, and a lot of perceptual. That said over last 5-7 years in tech it’s been a lot less facts and more perception.
It’s also a whole other discussion to call out that Wall Street as large with it’s ever more ridiculous growth requirements has gotten out of control. Lots of books out there about how bad the GE model was for the long term but somehow it hasn’t hit Wall Street either. Cut too far and you eventually hurt the product/company.
To clarify my ATT example, I have the below chart detailing the exact event in mind.
When it was all happening, I searched high and low for a fundamental reasoning, all I could find just didn't justify. So, I got in under $15, because I simply couldn't find a "why". And this is my point, it was moving in a way disconnected to fundamentals. And as a whole, this happens a lot in WS, a heck of a lot, hence the entire Day Trading segment.
So I work with one of those companies. Super familiar with all the ups and down of telecom last year. THat specific drop I’d have to go research but Q3 wasn’t good on the consumer side of AT&T and VZ. Both are losing to TMObile at a rapid pace. Fundamental direction on Tmobile is better also.
That date is about 2 weeks before both their earnings call. Could be market sentiment on expecting a miss based on the harsh language both companies have had in earnings. No idea and there can definitely be swings which I was calling out but last year both AT&T and VZ took a lot of pain due to fundamentals.
One day swing god who knows that tends to be sentiment - usually - Credit Suisse rearing it’s ugly head again today as an example but it’s a mix of sentiment and the report over weekend.
That's my point, it was sentiment, which is a perception, not a fundamental. And as the actual fundamentals came out, that proved the perceptions unfounded, it leapt back up to a level based around the fundamentals.
Which again, restates the fact that WS pricing moves heavily on Perceptual basis vs Fundamentals.
Again, if WS moved based upon Fundamentals, the movements would be near to nothing until reports come out and than would move in incremental movement to that report. We would see flat lines that than move for a few days each quarter.
And all the HFT would be out of it. Same as day traders. WS is not designed to act on fundamentals, the entire system is designed to TRADE, the profit motive is to make trades, and for trades there needs to be movement. The system itself is "rigged", in many ways but just keeping this to the founding premise, it's not designed to be an accurate reflection of values, it's designed for trading, by traders, for trading sake.
That’s why I was saying I agree with it to an extent. PErception does have an impact but generally speaking most stocks have strong fundamentals. BUT just like a bank run - perception/fear etc.. can have strong single day swings. The fundamentals tend to drive the long term.
Maybe to an extent i.e. the Tesla/Snowflake 25 to 100x earnings junk that was going on. But I know you are in tech and know how hard all companies including them got snacked down. All of a sudden every single company in tech is focused on EBITDA. And start-up valuations/investments are even changing a bit there also. It’s no longer wholly about get the market share then figure out revenue.
So there is a pivot going on in tech that is backing away from some of the stuff you ae commenting on
This is where I understand what James is trying to stay.
The equivalent in real estate is the high.comp and low.comp ; but that number is pretty much stable and predictable over the years, unlike stock because DCF value is inherently correlated to interest rate.
So Tesla is pricing $1000 while their capex/opex is the same with rate is 2% ; but when rate is 7%, their theoritical price using DCF is $80 dollar although their capex/opex is stable.
Real estate in reality is behaving like different animal, recent indication shows it's more affected by liquidity rather than interest-rate per-se.
This is very interesting topic really, this is why I also I dont mind taking out of 401k and re-investing in Real Estate.
Well last 5-7 years has had very odd ratios on the the big tech stocks but if you go towards the other industries it’s a LOT more stable but I still agree there is some perceptual value. It’s just in tech it got widely out of control.
For example even in the AT&T example James made (BTW verizon took similar hit)
the company might not have changed but the way TMObile was hitting both companies + plus the perceptions in value did change over that same period. So I don’t know if I’d say AT&T was in a vacuum. At the same time AT&T and VZ was taking a hit T-Mobile was growing market share and hitting them hard.
Also some of the things that AT&T and VZ got into (digital media) hurt both of them. T-Mobile stayed hyper focus.
I’m not saying I disagree with James or you - especially tech stocks. but I’m also saying I agree with Scott it’s a bit of both to me. 70% around health of company, market share, and growth options, and a lot of perceptual. That said over last 5-7 years in tech it’s been a lot less facts and more perception.
It’s also a whole other discussion to call out that Wall Street as large with it’s ever more ridiculous growth requirements has gotten out of control. Lots of books out there about how bad the GE model was for the long term but somehow it hasn’t hit Wall Street either. Cut too far and you eventually hurt the product/company.
To clarify my ATT example, I have the below chart detailing the exact event in mind.
When it was all happening, I searched high and low for a fundamental reasoning, all I could find just didn't justify. So, I got in under $15, because I simply couldn't find a "why". And this is my point, it was moving in a way disconnected to fundamentals. And as a whole, this happens a lot in WS, a heck of a lot, hence the entire Day Trading segment.
So I work with one of those companies. Super familiar with all the ups and down of telecom last year. THat specific drop I’d have to go research but Q3 wasn’t good on the consumer side of AT&T and VZ. Both are losing to TMObile at a rapid pace. Fundamental direction on Tmobile is better also.
That date is about 2 weeks before both their earnings call. Could be market sentiment on expecting a miss based on the harsh language both companies have had in earnings. No idea and there can definitely be swings which I was calling out but last year both AT&T and VZ took a lot of pain due to fundamentals.
One day swing god who knows that tends to be sentiment - usually - Credit Suisse rearing it’s ugly head again today as an example but it’s a mix of sentiment and the report over weekend.
Maybe to an extent i.e. the Tesla/Snowflake 25 to 100x earnings junk that was going on. But I know you are in tech and know how hard all companies including them got snacked down. All of a sudden every single company in tech is focused on EBITDA. And start-up valuations/investments are even changing a bit there also. It’s no longer wholly about get the market share then figure out revenue.
So there is a pivot going on in tech that is backing away from some of the stuff you ae commenting on
This is where I understand what James is trying to stay.
The equivalent in real estate is the high.comp and low.comp ; but that number is pretty much stable and predictable over the years, unlike stock because DCF value is inherently correlated to interest rate.
So Tesla is pricing $1000 while their capex/opex is the same with rate is 2% ; but when rate is 7%, their theoritical price using DCF is $80 dollar although their capex/opex is stable.
Real estate in reality is behaving like different animal, recent indication shows it's more affected by liquidity rather than interest-rate per-se.
This is very interesting topic really, this is why I also I dont mind taking out of 401k and re-investing in Real Estate.
Well last 5-7 years has had very odd ratios on the the big tech stocks but if you go towards the other industries it’s a LOT more stable but I still agree there is some perceptual value. It’s just in tech it got widely out of control.
For example even in the AT&T example James made (BTW verizon took similar hit)
the company might not have changed but the way TMObile was hitting both companies + plus the perceptions in value did change over that same period. So I don’t know if I’d say AT&T was in a vacuum. At the same time AT&T and VZ was taking a hit T-Mobile was growing market share and hitting them hard.
Also some of the things that AT&T and VZ got into (digital media) hurt both of them. T-Mobile stayed hyper focus.
I’m not saying I disagree with James or you - especially tech stocks. but I’m also saying I agree with Scott it’s a bit of both to me. 70% around health of company, market share, and growth options, and a lot of perceptual. That said over last 5-7 years in tech it’s been a lot less facts and more perception.
It’s also a whole other discussion to call out that Wall Street as large with it’s ever more ridiculous growth requirements has gotten out of control. Lots of books out there about how bad the GE model was for the long term but somehow it hasn’t hit Wall Street either. Cut too far and you eventually hurt the product/company.
Owning a stock, that's perceptual. There is no actual value there, it's an idea, a concept of a thing, and it only holds value as long as that concept holds value.
Huh? Stock is equity in a physical company. Are you saying that companies have "no actual value" and are just a "concept?"
James is right, stock company valuation is an arbitrary number only for that given time. When Tesla stock is $1,000 or $100 ,its opex/capex doesnt change although forward earnings may be different.
Arbitrary number?
For the vast majority of companies, the value of their equity is directly related to the discounted cash flow of their future earnings.
This is literally the premise of how equity is valued, regardless of whether you're talking about stocks, cash flowing real estate, or any other cash flowing asset.
Tesla, like many emerging tech companies, doesn't have well-defined future earnings, and there is additional value built into the equity for potential innovation. But, choosing an outlier like that doesn't change the literal premise of equities markets.
Yes DCF if you count as "theoretical price" only, but in actual reality, the price is more determined by the macro economy and supply/demand of particular stock, if it's just DCF value the stock price only moves by one to three dollar.
Maybe to an extent i.e. the Tesla/Snowflake 25 to 100x earnings junk that was going on. But I know you are in tech and know how hard all companies including them got snacked down. All of a sudden every single company in tech is focused on EBITDA. And start-up valuations/investments are even changing a bit there also. It’s no longer wholly about get the market share then figure out revenue.
So there is a pivot going on in tech that is backing away from some of the stuff you ae commenting on